BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1052|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: AB 1052
Author: Cooley (D)
Amended: 8/19/16 in Senate
Vote: 21
SENATE PUBLIC EMP. & RET. COMMITTEE: 5-0, 7/13/15
AYES: Pan, Morrell, Beall, Fuller, Hall
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 77-0, 5/7/15 (Consent) - See last page for
vote
SUBJECT: Retirement board authority: investments
SOURCE: California State Teachers' Retirement System
DIGEST: This bill provides that the California State Teachers'
Retirement System (CalSTRS) may enter into investment related
contracts, as specified, under terms and conditions established
by the board and consistent with its fiduciary duties,
notwithstanding any other law pertaining to state contracting.
Senate Floor Amendments of 8/19/16 delete the current language
in the bill relating to CalPERS so that the bill, which exempts
certain investment services contracts from the Public Contract
Code, now only applies to CalSTRS. The amendments also clarify
that investment service contracts by CalSTRS will be made under
competitive contracting processes, as specified.
ANALYSIS:
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Existing law:
1)Establishes, under The California Pension Protection Act of
1992 (Proposition 162) which amended Article XVI, Section 17
of the State Constitution, that the retirement board of a
public pension or retirement system has plenary authority and
fiduciary responsibility for investment of monies and
administration of the system.
2)Provides that, except as otherwise restricted by the State
Constitution and by law, the board may in its discretion
invest the assets of the respective funds through the
purchase, holding, or sale thereof of any investment,
financial instrument, or financial transaction when the
investment, financial instrument, or financial transaction is
prudent in the informed opinion of the board.
3)Requires, based on provisions in the California Constitution,
that services provided by state agencies generally be
performed by state civil service employees.
4)Restricts under state law, but does not prohibit, private
contracting by public agencies. Public agencies are
authorized to engage in private contracting in various
instances, as specified.
5)Establishes, under the Public Contract Code, a process that
state departments must follow and requirements, as specified,
that must be fulfilled to bid out and enter into service
contracts, including requirements for competitive bidding and
contractor certification of compliance with specified state
policies.
6)Provides limited exceptions to the Public Contract Code, as
specified.
This bill:
1)Provides that, notwithstanding any other law pertaining to
state contracting, CalSTRS, in exercising its constitutional
discretion to invest fund assets, may contract for services
under terms and conditions and utilizing the processes the
boards deem necessary and consistent with its fiduciary
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duties.
2)Requires the processes utilized by CalSTRS to be competitive
except as allowed under existing law through specific
exemptions in the Public Contract Code (e.g., for an emergency
contract), as specified.
3)Provides, for CalSTRS, a new exemption to the requirement that
the contract process be competitive when there is an existing
contractual relationship with an investment manager that had
previously qualified as an emerging investment manager, as
defined by the board. The bill requires that the CalSTRS
board monitor and assess contractors under this exemption in
accordance with all other provisions governing investment
managers generally and consistent with the board's fiduciary
duties.
Background
According to CalSTRS, "As global markets become more complex and
the assets of California's state retirement systems grow in
size, CalSTRS board is increasingly constrained by the
traditional state procurement requirements when contracting for
investment expertise. Authorizing the board to set the terms
and conditions for procuring investment management services,
thus eliminating the opportunity costs that result from a
diminished universe of potential managers and from delays in the
timely funding of asset allocations strategies, would
significantly enhance the board's ability to successfully
fulfill their fiduciary obligations and secure the best value
for our members."
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
AB 1052 passed the Senate Appropriations Committee pursuant to
Rule 28.8.
According to the Assembly Appropriations Committee this bill
would result in "Potentially significant administrative cost
savings as a result of reduced staff work and other efficiency
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gains in contracting for investment-related services."
SUPPORT: (Verified8/22/16)
California State Teachers' Retirement System (source)
OPPOSITION: (Verified8/22/16)
None received
ARGUMENTS IN SUPPORT: According to the sponsor, this bill
"would enhance the board's ability to secure the best value for
members and beneficiaries and successfully fulfill their
fiduciary obligations."
ASSEMBLY FLOOR: 77-0, 5/7/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,
Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,
Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark
Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams,
Wood, Atkins
NO VOTE RECORDED: Campos, Roger Hernández, Steinorth
Prepared by:Glenn Miles / P.E. & R. / (916) 651-1519
8/22/16 20:37:34
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